Sabyasachi Mukharji, J.
1. In this reference under Section 256(1) of the I.T. Act, 1961, the following two questions have been referred to this court:
' 1. Whether, on the facts and in the circumstances of the case and on a correct interpretation of Section 215 of the Income-tax Act, 1961, the Tribunal was right in holding that, for the purpose of determining the shortfall in the payment of advance tax, the tax relating to income as per the regular assessment should be computed at the rates of tax applicable to the assessment year, if the tax so computed was lower than the tax calculated at the rates of tax in force in the financial year in which the advance tax was payable ?
2. Whether, on the facts and in the circumstances of the case and in view of the fact that tax payable on the basis of the regular assessment at the rates of tax in force in the assessment year was less than the tax calculated at the rates of tax in force in the financial year in which the advance tax was payable, the Tribunal was right in holding that the difference between the taxes calculated at the rates of tax in force, in the said years was not 'due to variations in the rates of tax.' within the meaning of Section 215 of the Income-tax Act, 1961, and in that view holding that there was no shortfall in the payment of the advance tax on which any interest could be charged under the said section ?'
2. The assessee is a limited company. The assessment year involved is 1965-66 for the year ending 31st of March, 1965, as the previous year. The ITO made a demand under Section 210 of a sum of Rs. 9,06,920.85 by notice of demand dated 2nd January, 1965. During the financial year ending 31st of March, 1965, the assessee paid a sum of Rs. 7 lakhs as advance tax under Section 212 on its own estimate. The regular assessment for the assessment year. 1965-66 was completed on 10th March, 1970, resulting in a demand of Rs. 8,91,407. The ITO did not direct, in his assessment order or elsewhere, that interest under Section 215 be charged on the asses see. There was nothing on the record of the ITO to show that he had considered the question of levy of interest under Section 215 and had waived the same after due consideration. We may incidentally mention that the Tribunal has used the expression 'penal interest', a point to which we shall refer later.
3. It appears that subsequently on a review of the assessment order, the Addl. Commissioner was of the opinion that the ITO had erred in not considering the question of levy of interest under Section 215 of the Act and, therefore, held that the order of assessment was erroneous being prejudicial to the interests of the revenue. Accordingly, under Section 263 of the I.T. Act, 1961, he passed an order on 28th January, 1972, holding that a sum of Rs, 14,658 was chargeable as interest under Section 215 of the Act and directed the ITO to levy and demand the said amount from the assessee. In the order, he directed that the ITO might consider if the assessee's case for waiving interest came under the prescribed conditions and, if so, to what extent. Pursuant to that order, the ITO passed an order dated 16th February, 1972, by which he demanded a sum of Rs. 14,658 as interest under Section 215 of the I.T. Act, 1961. Against the aforesaid order of the Addl. Commissioner, the assessee went up in appeal before the Tribunal. The Tribunal, after consideration of the relevant different sections, contentions and the scheme of the Act, upheld the contention of the assessee-company. It held that 'variations' used in Section 215 covered both increase and reduction. But looking at the other two adjustments which had resulted in reduction from regular tax, it appeared to the Tribunal that their adjustment also contemplated a reduction from and not addition to the regular tax and observed, construing the expression 'in so far as it is not due to', pointed to a part of the regular tax embedded in which could be said to be due to the variation in the rates and this could happen only if the rates of tax introduced by the Finance Act were higher than those of the preceding year so that the regular tax became higher. But, if the regular tax was lower than the rate of tax, then no portion of it could be said to be due to such reduction. The contention of the revenue that the intention was to ignore the rates of tax, as introduced by the Finance Act, during the assessment year and to calculate the taxes on income regularly assessed at the rate for the preceding year was not accepted by the Tribunal. Accordingly, the Tribunal held that the matter was beyond reasonable doubt and the benefit, in any event, should go to the assessee. The Tribunal, therefore, upheld the contention of the assessee and cancelled the order of the Addl. Commissioner dated 28th January, 1972.
4. Upon these, under Section 256(1) of the I.T. Act, 1961, the questions, mentioned hereinbefore, have been referred to this court. Before we proceed to consider the contentions, it would be necessary to refer to the actual terms used in Section 215. Section 215 has subsequently undergone modification. But as it stood at the relevant time prior to its amendment was as follows :
'Where in any financial year an assessee has paid advance tax under Section 212 on the basis of his own estimate, and the advance tax so paid is less than seventy-five per cent, of the tax determined on the basis of the regular assessment (reduced by the amount of tax deductible in accordance with the provisions of Sections 192 to 194, Section 194A and Section 195) so far as such tax relates to income subject to advance tax and so far as it is not due to variations in the rates of tax made by the Finance Act enacted for the year for which the regular assessment is made, simple interest at the rate of nine per cent. per annum from the first day of April next following the said financial year up to the date of the said regular assessment shall be payable by the assessee upon the amount by which the advance tax so paid falls short of the said seventy-five per cent.'
5. Learned advocate for the revenue drew our attention to the Scheme of the Act and he referred to Chap. XVII of the I.T. Act, 1961, which begins with Section 190. This is contained in Chap. XVII which deals with collection and recovery of taxes. It contemplates deduction of taxes at source and advance payment of taxes. The method of deduction envisages, according to the learned advocate for the revenue, in Sections 190, 191, 192 onwards, that it has to be deducted on a calculation of the taxes due from the assessee, in certain circumstances, in the relevant financial year. Section 207 of the Act deals with advance tax and income subject to advance tax. Section 208 prescribes the condition of liability to pay advance tax and Section 209 lays down the method of computation of advance tax. Learned advocate for the revenue tried to emphasise that the calculation and payment or deduction had to be made at the rate in force in the financial year. Section 210 contemplates the service of notice for payment of advance tax and Section 212 prescribes payment by filing an estimate. Learned advocate for the revenue stressed that the estimate that was required to be filed was of two kinds, viz., (1) estimate of income, and (2) estimate of tax and according to him such taxes had to be calculated at the rate prevailing in the financial year. This is an important indication, according to the learned advocate for the revenue, which indicated that liability to pay advance tax was imposed by the statute on the basis of calculation and it was also provided in the statute that it was to be paid at the prevalent rate in the relevant financial year. Therefore, that is a statutory liability imposed on the assessee. Section 214 deals with payment of simple interest by the Government at 12 per cent. per annum on the amount by which the aggregate sum of any instalments of advance tax paid during any financial year in which they are payable under Sections 203 to 213 exceeded the amount of the tax determined on regular assessment from the 1st day of April next following the said financial year to the date of the regular assessment for the assessment year immediately following the said financial year, and where any such instalment was paid after the expiry of the financial year during which it was payable by reason of the provisions of Section 213, interest as aforesaid should also be payable on .that instalment from the date of its payment to the date of regular assessment. Section 215, as we have mentioned and as it stood at the relevant time, imposes an obligation for payment of interest by the assessee. This, according to the learned advocate for the revenue, is a statutory obligation, for payment of interest for non-compliance with certain conditions contemplated by that section and obligation to pay tax at the rates prevalent at the time when the advance tax was due to be paid. Learned advocate for the revenue drew our attention to the expression 'due to variation in the rates of taxes'. According to him, the expression, 'variation in the rates of taxes' indicated both reduction as well as excess. The expression 'variation' was defined in the dictionary including the Oxford Dictionary as an expression which means departure from the former or the normal condition or action or a modification. Therefore, it comprises of modification both upward and downward. So the obligation, according to him, contemplated by Sub-section (1) of Section 215 might result in either an increase or a decrease, but that must be caused by the variations in the rates of taxes. So, for this variation in rates, according to him, even if there is any lesser payment, then the assessee will be liable to pay interest. But this variation, he wants us to read, must be calculated with reference to the rate prevailing at the time of the obligation to pay the advance tax, that is to say, in the relevant financial year and not the relevant assessment year.
6. The fundamental aspect to be borne in mind is that tax is due at the rate prevailing in the relevant assessment year. The method of payment of advance tax was introduced in order to facilitate collection of dues as assessed by the regular assessment. This position is made clear by the Supreme Court in its decision in the case of Purshottamdas Thakurdas v. CIT : 48ITR206(SC) , where the Supreme Court at pages 211 and 212 of the report observed, inter alia, as follows :
'Section 18A which was inserted in 1944 deals with advance payment of tax. It was introduced as a war measure probably to combat inflation, but, like many other innovations in taxation legislation, it has outlived the exigency which necessitated it. The section applies to those assessees whose total income in the latest assessment, and also to those hitherto unassessed, whose total income of the previous year, exceeded by a certain sum the maximum amount not chargeable to tax. The section attempts to reconcile the principle of advance payment of tax with the scheme of the Act which is to tax the income of the previous year. The basis of the section is the principle of ' pay as you earn Y that is, paying tax by instalments in respect of the income of the very year in which the tax is paid. Sub-section (1) provides for the payment of tax in respect of the income of the latest previous year ' while under Sub-section (11) the tax so paid is treated as having been paid in respect of the income of the year of payment and credit therefor is given to the assessee in the regular assessment made in the next financial year. The advance payment of tax is only provisional, and if after the regular assessment is made the tax paid in advance is found to be in excess of the tax payable, the assessee would be entitled to a refund of such excess. Further, it is worthy of note that the provision for advance payment of tax under Section 18A is only in respect of income from which the tax is not deductible at the source under Section 18.'
7. In our opinion, in order to construe the effect of this section, we must bear in mind that the obligation to pay interest arises only if there is a difference between the tax paid under Section 212 on the basis of his own estimate and the advance tax so paid is less than 75 per cent, of the tax determined on the basis of regular assessment (underlined* by us). Therefore, in order to attract the provisions of that section, the advance tax so paid must be less than 75 per cent, of the tax determined on the basis of regular assessment. The regular assessment of tax can only be determined with reference to the rates prevalent in the assessment year and it was not a tax assessable at the rate in the financial year but it would be an assessment made on the basis of regular assessment. Then, the section contemplates that it will be reduced by an amount of tax deductible in accordance with the provisions of Sections 192 to 195 so far as such tax relates to the income subject to advance tax and in so far as it is not due to variations in the rates of tax. Therefore, we are faced with three expressions, the tax determined on the basis of 'regular assessment'. Next expression is 'such tax' and the third expression is 'it'. These three expressions must, in our opinion, mean only one thing, that is, the tax which is assessed at the rate prevailing in the assessment year because that is the assessed tax. The shortfall from that tax or the amount paid lesser than that tax, that is contemplated to be covered by Section 215, Sub-section (1). Therefore, the variation which is due in the rates of tax must be due to variation due to a reduction of the tax assessed and can never be in a case where there may be a decrease. On that construction of the section, we are of the opinion that the construction urged by the learned advocate for the revenue cannot be accepted.
8. The Tribunal, in our opinion, has rightly analysed the scheme of the section in Part C of Chap. XVII dealing with advance tax. Section 210 empowers the ITO to demand an advance tax on the basis of the tax determined as payable in the latest regular assessment completed. Section 212 gives the assessee an option to pay the amount of advance tax demanded under Section 210 or the sum which he estimates as the tax that would be payable on completion of the regular assessment for the following year. Section 215 in particular terms stated that if the estimate made by an assessee turns out to be short by 75 per cent. of the tax determined on the basis of regular assessment, interest on the advance tax was payable by the assessee. Section 215 was a penal provision and, according to the Tribunal, this point should not be lost sight of in deciding the issue. The Tribunal also found that the section enjoined a comparison between the advance tax paid and the tax determined on regular assessment. The tax determined on regular assessment was subject to three adjustments, as mentioned in the section. According to the assessee, where the Finance Act increased the rates of tax then the portion of the regular tax attributable to such increase should be deducted from the regular tax and the balance alone should be compared. On the other hand, it was contended that the obligation to pay interest was imposed upon the Government under Section 214 of the Act and if the obligation was to pay tax by the assessee on the basis of the rate prevalent in the financial year only, then there was no point in imposing an obligation on the Government by Section 214 to pay interest on the amount paid by the assessee. It is true that the expression 'variation' could mean both reduction and increase. But the expression 'due to variation' used in this section related to the expression 'it' which again must be related to 'such tax' which must be referable to the tax determined on the basis of the regular assessment.
9. In support of the contentions that this expression should be construed in its ordinary meaning, learned advocate for the revenue drew our attention to the observations of the Supreme Court in the case of Board of Revenue v. A. P. Benthall, : 2SCR842 , where the Supreme Court emphasised that where different expressions were used in the same statute they should be so construed as to convey the same meaning in a particular section. That is a principle which must always be borne in mind in construing a provision of this nature. Even if the expression 'variation' would mean both reduction and increase, that variation must be due to rates prescribed in the assessment year. In support of this proposition that the expression ' modified' will comprehend both alterations either way, reliance was placed on the observations of the Division Bench of the Bombay High Court in the case of Cantonment Board, Poona v. Western India Theatres Ltd., : AIR1954Bom261 . This proposition also, in our opinion, cannot be disputed. Bat, this does not help the learned advocate for the revenue very materially for the reasons we have already indicated.
10. Our attention was drawn to the Notes on Clauses of the Finance Bill, 1961, introducing Section 215 and it stated that this section was sought to be introduced in order to implement the recommendation of the Direct Taxes Administration Enquiry Committee. Our attention was drawn to the relevant portion of the Direct Taxes Administration Enquiry Committee's Report contained in para. 5.32 of its report, which observed as follows:
'5.32. Difficulty in estimating income.--Another line of criticism levelled was with regard to the difficulties faced by assessees in estimating their income with any high degree of accuracy as it was being earned and before the closing of the final accounts. It was suggested that the margin of error now allowed at 20 per cent. may be enlarged. The present provisions, no doubt, do take into account the different circumstances and provide reasonable protection to the interests of an honest taxpayer. Every assessee gets a minimum period of six months from the beginning of his account year before he is required to pay his first instalment of tax. He can also submit revised estimates as the year progresses and pay taxes on the basis of such revised estimates. However, we feel that to alleviate the grievances on this score the range error now fixed at 20 per cent. should be increased to 25 per cent. We, therefore, recommend that an assessee should be liable for interest and penalty only if his estimate turns out to be less than 75 per cent. of the tax eventually assessed, after making adjustments for items of income on which tax is deductible at source and also for the variations in the rates of tax made by the subsequent Finance Act.'
11. It is significant to bear in mind that the Committee was considering the obligation. of payment of tax as a penalty because the Committee had used the expression that the assessee should be liable for interest and penalty only if his estimate turned out to be less than 75 per cent. of the tax eventually assessed. Therefore, this obligation to pay interest as well as the penalty was sought to be passed on the assessee if the tax paid was less than 75 per cent. of the tax 'eventually assessed'. Therefore, it has to be borne in mind that with a view to facilitating the collection of the tax 'eventually assessed', that is to say, the tax which is assessed at the rate prevalent for the assessment year, the difference must be calculated. If we bear that in mind then, in our opinion, the construction put by the Tribunal is the only reasonable and plausible construction in this case.
12. Certain arguments were advanced before us on the aspect of the Tribunal's reasoning that where there was a penal provision and there was any question of doubt, it should be resolved in favour of the assessee. Our attention in this connection was drawn to the observations of the Supreme Court in the case of Gursahai Saigal v. CIT : 48ITR1(Bom) , where the learned judge, delivering the judgment, referred really to the construction and applicability of the taxing statute. Dealing with the observations of Rowlatt J. in the case of Cape Brandy Syndicate v. IRC  1 KB 64 (KB), in connection with Section 18A, the Supreme Court observed that the provisions of this section laid down the machinery for the assessment of interest. That sub-section was intended to and did in the clearest terms impose a charge for interest beyond dispute. It stated that the interest calculated in a certain manner 'shall be added to the tax'. The Supreme Court felt that they had not to resort to any equitable rule of construction or to alter the meaning of the language used or to add to or vary it in order to arrive at the conclusion that the provision intended to impose a liability to pay interest. That was the plain effect of the language used. But the sub-section also provided that the interest for which liability was created had to be calculated in a certain manner and in giving effect to the machinery section, the Supreme Court noted, that the machinery section should be so construed as would effectuate the performance of the Act. There cannot be any dispute as to this proposition that the machinery section should be construed in a manner which would effectuate the performance of the Act but a section which imposes a liability must be strictly construed and, in case, of any doubt, such construction which favours the assessee must be adhered to. In this case, as we have come to the conclusion that if the expression 'in so far as' is kept in mind in conjunction with the expressions used, viz., 'tax determined on the basis of regular assessment', 'such tax' and the word 'it' and then related to the expression 'due to variations in the rates' then this only refers to an increase and where there is an increase in the liability by a regular assessment, then Section 215 would be attracted. That follows on a strict construction of the section. But, even if one has to bear in mind that some alternative construction is possible only of the expression ' variations in the rates of taxes', taken out of context, even then this should be construed in the background of the other construction in favour of the assessee.
13. On the aspect that Section 215 imposes some kind of penalty, reliance was placed on certain observations of the courts where this interest has been described as a penal interest. As a matter of fact, the Tribunal has also proceeded on that basis. Reliance may be placed in this connection on742 ITR 128the observations of the courts in the case of National Products v. CIT : 108ITR935(KAR) , in the case of CIT v. Daimler Benz A. G. : 108ITR961(Bom) and in the case of CIT v. Lalit Prasad Rohini Kumar : 117ITR603(Cal) . The liability to pay interest arises, in our opinion, essentially when there is a failure to pay what was legitimately due and, in that context, it is a kind of compensation or penalty if one would like to call it. It is not necessary for us, however, to determine whether it is in the nature of a penalty, as it is understood in the I.T. Act, because it does not fall for our consideration.
14. In the view we have taken, we answer question No. 1 in the affirmative and in favour of the assessee and the answer to question No. 2 automatically follows and is answered in the affirmative and in favour of the assessee.
15. Each party will pay and bear its own costs.
Sudhindra Mohan Guha, J.
16. I agree.